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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 24, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-39898

drvn-20220924_g1.jpg

Driven Brands Holdings Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
47-3595252
(I.R.S. Employer Identification No.)
440 South Church Street, Suite 700
Charlotte, North Carolina
(Address of principal executive offices)
28202
(Zip Code)
Registrant’s telephone number, including area code: (704) 377-8855

Title of each class
Common Stock, $0.01 par value
Trading Symbol
DRVN
Name of each exchange on which registered
The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Small reporting company
Emerging growth company
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of November 1, 2022, the Registrant had 167,404,047 shares of Common Stock outstanding.



Driven Brands Holdings Inc.
Table of Contents
Page
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION



Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. In particular, forward-looking statements include, among other things, statements relating to: (i) our strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; and (iv) the competitive environment in which we operate. Forward-looking statements are not based on historical facts, but instead represent our current expectations and assumptions regarding our business, the economy and other future conditions, and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. It is not possible to predict or identify all such risks. These risks include, but are not limited to, the risk factors that are described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2021, as supplemented by Item 1A Risk Factors section in our Quarterly Report on Form 10-Q for the three and six months ended June 25, 2022 and this Quarterly Report on Form 10-Q as well as in our other filings with the Securities and Exchange Commission, which are available on its website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements represent our estimates and assumptions only as of the date on which they are made, and we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.




Part I - Financial Information
Item 1. Financial Statements (Unaudited)
DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months endedNine months ended
(in thousands, except per share amounts)September 24, 2022September 25, 2021September 24, 2022September 25, 2021
Revenue:
Franchise royalties and fees$45,562 $38,953 $128,300 $107,240 
Company-operated store sales341,211 213,755 957,487 603,808 
Independently-operated store sales40,469 47,941 158,500 160,483 
Advertising contributions22,018 19,762 63,807 56,665 
Supply and other revenue67,334 50,737 185,447 147,199 
Total revenue516,594 371,148 1,493,541 1,075,395 
Operating Expenses:
Company-operated store expenses209,562 130,520 580,368 367,095 
Independently-operated store expenses23,254 27,764 85,396 89,664 
Advertising expenses22,018 19,762 63,807 56,665 
Supply and other expenses41,042 28,330 109,616 80,417 
Selling, general, and administrative expenses82,460 71,565 272,657 218,549 
Acquisition costs2,325 636 9,981 2,674 
Store opening costs753 666 1,925 1,360 
Depreciation and amortization36,518 28,447 107,628 78,722 
Trade name impairment charge  125,450  
Asset impairment charges and lease terminations2,894 (270)2,910 3,161 
Total operating expenses420,826 307,420 1,359,738 898,307 
Operating income95,768 63,728 133,803 177,088 
Other expenses, net:
Interest expense, net27,323 17,688 78,946 52,390 
Loss (gain) on foreign currency transactions15,582 1,074 30,490 6,356 
Loss on debt extinguishment   45,576 
Other expense, net42,905 18,762 109,436 104,322 
Income before taxes52,863 44,966 24,367 72,766 
Income tax expense14,472 11,880 8,592 24,445 
Net income38,391 33,086 15,775 48,321 
Net income (loss) attributable to non-controlling interest (38)(15)(68)
Net income attributable to Driven Brands Holdings Inc.$38,391 $33,124 $15,790 $48,389 
Earnings per share:
Basic$0.23 $0.20 $0.10 $0.30 
Diluted$0.23 $0.19 $0.09 $0.29 
Weighted average shares outstanding
Basic162,760 162,635 162,768 160,030 
Diluted166,831 166,630 166,663 163,968 
The accompanying notes are an integral part of these consolidated financial statements.
3



DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three months endedNine months ended
(in thousands)September 24, 2022September 25, 2021September 24, 2022September 25, 2021
Net income $38,391 $33,086 $15,775 $48,321 
Other comprehensive income (loss):
   Foreign currency translation adjustment(71,063)(30,844)(118,751)(28,675)
   Unrealized gain from cash flow hedges8,606 (1)8,513 29 
   Defined benefit pension plan actuarial gain5 3 12 131 
Other comprehensive loss, net(62,452)(30,842)(110,226)(28,515)
Total comprehensive income (loss)(24,061)2,244 (94,451)19,806 
Comprehensive loss attributable to non-controlling interests(15)(47)(36)(8)
Comprehensive income (loss) attributable to Driven Brands Holdings Inc.$(24,046)$2,291 $(94,415)$19,814 
The accompanying notes are an integral part of these consolidated financial statements.
4


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share and per share amounts)
September 24, 2022December 25, 2021
Assets
Current assets:
Cash and cash equivalents$190,373 $523,414 
Restricted cash 792 792 
Accounts and notes receivable, net156,194 117,903 
Inventory62,569 46,990 
Prepaid and other assets53,456 24,326 
Income tax receivable5,070 6,867 
Assets held for sale 3,275 
Advertising fund assets, restricted53,233 45,360 
Total current assets521,687 768,927 
Notes receivable, net6,636 3,182 
Property and equipment, net1,693,353 1,350,984 
Operating lease right-of-use assets1,089,693 995,625 
Deferred commissions9,607 10,567 
Intangibles, net717,959 816,183 
Goodwill2,082,572 1,910,392 
Deferred tax assets1,165 1,509 
Total assets$6,122,672 $5,857,369 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable$79,392 $83,033 
Accrued expenses and other liabilities266,223 297,620 
Income tax payable48,264 11,054 
Current portion of long term debt23,836 26,044 
Income tax receivable liability24,255 24,255 
Advertising fund liabilities26,738 26,441 
Total current liabilities468,708 468,447 
Long-term debt2,656,520 2,356,320 
Deferred tax liabilities211,554 257,067 
Operating lease liabilities1,024,694 931,604 
Income tax receivable liability131,715 131,715 
Deferred revenue42,024 37,576 
Long-term accrued expenses and other liabilities22,505 29,398 
Total liabilities4,557,720 4,212,127 
Commitments and contingencies
Common stock, $0.01 par value, 900 million shares authorized: and 168 million and 167 million shares issued at June 25, 2022 and December 25, 2021.
1,677 1,674 
Additional paid-in capital1,620,480 1,605,890 
Retained earnings57,397 41,607 
Accumulated other comprehensive loss(115,233)(5,028)
Total shareholders’ equity attributable to Driven Brands Holdings Inc.1,564,321 1,644,143 
Non-controlling interests631 1,099 
Total shareholders' equity1,564,952 1,645,242 
Total liabilities and shareholders' equity$6,122,672 $5,857,369 
    
The accompanying notes are an integral part of these consolidated financial statements.
5


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’/MEMBERS’ EQUITY (Unaudited)
in thousandsCommon stockAdditional paid-in capitalRetained earningsAccumulated other
comprehensive
income (loss)
Non-controlling
interests
Total shareholders'/members' equity
Balance as of December 26, 2020
$565 $1,055,172 $31,975 $16,528 $2,120 $1,106,360 
Net income (loss)— — (19,939)— 7 (19,932)
Other comprehensive loss— — — (9,085)— (9,085)
Equity-based compensation expense— 983 — — — 983 
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions1,082 660,418 — — — 661,500 
Common stock issued upon underwriter's exercise of over-allotment48 99,177 — — — 99,225 
Repurchase of common stock(21)(42,956)— — — (42,977)
Exercise of stock options— 25 — — — 25 
Establishment of income tax receivable liability— (155,970)— — — (155,970)
IPO fees— (14,757)— — — (14,757)
Other— — — — (63)(63)
Balance as of March 27, 2021$1,674 $1,602,092 $12,036 $7,443 $2,064 $1,625,309 
Net income (loss)— — 35,204 — (37)35,167 
Other comprehensive loss— — — 11,412 — 11,412 
Equity-based compensation expense— 1,028 — — — 1,028 
At-Pac divestiture— — — — (948)(948)
Other— (25)— (1)— (26)
Balance as of June 26, 2021$1,674 $1,603,095 $47,240 $18,854 $1,079 $1,671,942 
Net income (loss)— — 33,124 — (38)33,086 
Other comprehensive income (loss)— — — (30,902)60 (30,842)
Equity-based compensation expense— 933 — — — 933 
Exercise of stock options— 314 — — — 314 
Other—  — 1 63 64 
Balance as of September 25, 2021$1,674 $1,604,342 $80,364 $(12,047)$1,164 $1,675,497 
Balance as of December 25, 2021
$1,674 $1,605,890 $41,607 $(5,028)$1,099 $1,645,242 
Net income (loss)— — 34,443 — $(15)34,428 
Other comprehensive income (loss)— — — (5,455)13 (5,442)
Equity based compensation expense— 2,618 — — — 2,618 
Stock issued related to Employee Stock Purchase Plan1 2,091 — — — 2,092 
Tax withholding on stock option exercises— (14)— — — (14)
Divestiture of Denmark car wash operations— — — — (432)(432)
Balance as of March 26, 2022$1,675 $1,610,585 $76,050 $(10,483)$665 $1,678,492 
Net loss— — (57,044)— — (57,044)
Other comprehensive loss— — — (42,313)(19)(42,332)
Equity based compensation expense— 4,233 — — — 4,233 
Stock option exercised2 109 — — — 111 
Balance as of June 25, 2022$1,677 $1,614,927 $19,006 $(52,796)$646 $1,583,460 
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Net income — — 38,391 — — $38,391 
Other comprehensive loss— — — (62,437)(15)$(62,452)
Equity based compensation expense— 5,308 — — — $5,308 
Stock option exercised 245 — — — $245 
Balance as of September 24, 2022$1,677 $— $1,620,480 $— $57,397 $— $(115,233)$— $631 — $1,564,952 
The accompanying notes are an integral part of these consolidated financial statements.
7


DRIVEN BRANDS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine months ended
(in thousands)September 24, 2022September 25, 2021
Net income (loss)$15,775 $48,321 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization107,628 78,722 
Trade name impairment125,450  
Non-cash lease cost65,075 56,563 
Loss on foreign denominated transactions30,490 9,301 
Gain on foreign currency derivatives (2,945)
Bad debt expense1,011 2,535 
Asset impairment costs2,910 3,161 
Amortization of deferred financing costs and bond discounts6,807 5,139 
Benefit (provision) for deferred income taxes(38,216)15,898 
Loss on extinguishment of debt 45,576 
Other, net312 4,257 
Changes in assets and liabilities, net of acquisitions:
Accounts and notes receivable, net(44,063)(28,787)
Inventory(17,898)(3,279)
Prepaid and other assets850 (18,414)
Advertising fund assets and liabilities, restricted(4,612)5,818 
Deferred commissions917 (1,205)
Deferred revenue2,222 3,983 
Accounts payable(12,321)(3,903)
Accrued expenses and other liabilities(59,844)25,595 
Income tax receivable37,931 (320)
Operating lease liabilities(52,772)(47,821)
Cash provided by operating activities167,652 198,195 
Cash flows from investing activities:
Capital expenditures(276,222)(93,627)
Cash used in business acquisitions, net of cash acquired(652,085)(442,488)
Proceeds from sale-leaseback transactions150,112 66,391 
Proceeds from sale of company-operated stores 1,532 
Proceeds from disposition of car wash operations1,551  
Proceeds from disposal of property and equipment4,876 5,471 
Cash used in investing activities(771,768)(462,721)
Cash flows from financing activities:
Payment of debt extinguishment and issuance costs (2,153)
Repayment of long-term debt(15,772)(716,542)
Proceeds from revolving lines of credit and short-term debt300,000 441,800 
Repayments of revolving lines of credit and short-term debt (212,800)
Repayment of principal portion of finance lease liability(2,229)(1,760)
Proceeds from initial public offering, net of underwriting discounts 661,500 
Net proceeds from underwriters' exercise of over-allotment option 99,225 
Repurchases of common stock (43,040)
Payment for termination of interest rate swaps (21,826)
Stock option exercises651 339 
Other, net(70)102 
Cash provided by financing activities282,580 204,845 
8


Effect of exchange rate changes on cash(7,705)(2,285)
Net change in cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted(329,241)(61,966)
Cash and cash equivalents, beginning of period523,414 172,611 
Cash included in advertising fund assets, restricted, beginning of period38,586 19,369 
Restricted cash, beginning of period792 15,827 
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, beginning of period562,792 207,807 
Cash and cash equivalents, end of period190,373 115,365 
Cash included in advertising fund assets, restricted, end of period42,386 30,341 
Restricted cash, end of period792 135 
Cash, cash equivalents, restricted cash, and cash included in advertising fund assets, restricted, end of period$233,551 $145,841 
Supplemental cash flow disclosures - non-cash items:
Accrued capital expenditures, end of period$8,539 $6,123 
Supplemental cash flow disclosures - cash paid for:
Interest $78,572 $53,842 
Income taxes $9,184 $10,593 

The accompanying notes are an integral part of these consolidated financial statements.
9


DRIVEN BRANDS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Note 1—Description of Business
Description of Business
Driven Brands Holdings Inc. together with its subsidiaries (collectively, the “Company”) is a Delaware corporation and is the parent holding company of Driven Brands, Inc. and Shine Holdco (UK) Limited (collectively, “Driven Brands”). Driven Brands is the largest automotive services company in North America with a growing and highly-franchised base of more than 4,700 franchised, independently-operated, and company-operated locations across 49 U.S. states and 14 other countries. The Company has a portfolio of highly recognized brands, including Take 5 Oil Change®, Take 5 Car Wash®, Meineke Car Care Centers®, MAACO®, CARSTAR®, Auto Glass Now®, and 1-800-Radiator & A/C® that compete in the automotive services industry. Approximately 76% of the Company’s locations are franchised or independently-operated.

Initial Public Offering and Secondary Offerings
On January 14, 2021, the Company completed an initial public offering (the “IPO”) of approximately 32 million shares of common stock at $22 per share. On February 10, 2021, the Company’s underwriters exercised their over-allotment option to purchase approximately 5 million additional shares of common stock. The Company received total proceeds of $761 million from these transactions, net of the underwriting discounts and commissions.

The Company used the proceeds from the IPO, along with cash on hand, to fully repay the term loans and revolving credit facility assumed as part of the acquisition of International Car Wash Group (“ICWG”) in 2020 (collectively, the “Car Wash Senior Credit Facilities”), which totaled $725 million with interest and fees. The Company recognized a $46 million loss on debt extinguishment for nine months ended September 25, 2021 related to this settlement, primarily related to the write-off of the unamortized discount. The Company cancelled the interest rate and cross currency swaps associated with these debt agreements as part of the settlement. The Company also used $43 million in proceeds to purchase approximately 2 million shares of common stock from certain of our existing shareholders.

On August 2, 2021, the Company filed a Registration Statement on Form S-1 for a secondary offering of approximately 12 million shares of common stock at $29.50 per share by certain of the Company’s stockholders, Driven Equity LLC and RC IV Cayman ICW Holdings LLC, each of which is a related party of Roark Capital Management, LLC. The Company did not sell any common stock in the offering and did not receive any proceeds from the offering. On September 8, 2021, the underwriters for the secondary offering exercised a portion of their over-allotment option and purchased 881,393 additional shares of common stock. The Company did not receive any proceeds from the exercise of the over-allotment option.

On September 12, 2022, the Company filed a Registration Statement on Form 424B7 for an underwritten secondary offering of 7 million shares of common stock at $32.19 per share by certain of the Company’s stockholders, Driven Equity LLC and RC IV Cayman ICW Holdings LLC, each of which is a related party of Roark Capital Management, LLC. The Company did not sell any common stock in the offering and did not receive any proceeds from the offering.

Income Tax Receivable Agreement
The Company expects to be able to utilize certain tax benefits which are related to periods prior to the effective date of the Company’s IPO and are attributed to current and former shareholders. The Company previously entered into an income tax receivable agreement which provides our pre-IPO shareholders with the right to receive payment of 85% of the amount of cash savings, if any, in U.S. and Canadian federal, state, local and provincial income tax that the Company will actually realize. The income tax receivable agreement is effective as of the date of the Company’s IPO. The Company has recorded a total liability of $156 million as of September 24, 2022 and December 25, 2021, of which $24 million and $132 million are recorded under current and non-current liabilities, respectively.

Stock Split
On January 14, 2021, the Company’s shareholders approved an amendment to the Company’s certificate of incorporation (the "Amendment") to effect an implied 88,990-for-one stock split of shares of the Company’s outstanding
common stock. In addition, the Amendment increased the number of authorized shares of the Company's stock from 10,000 shares to 1 billion shares (900 million shares of common stock and 100 million shares of preferred stock). All share and per-share data in the consolidated financial statements and footnotes has been retroactively adjusted to reflect the stock split for all periods presented. The Company does not have any shares of preferred stock outstanding.

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Note 2— Summary of Significant Accounting Policies

Fiscal Year
The Company operates and reports financial information on a 52- or 53-week year with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The three and nine months ended September 24, 2022 and September 25, 2021, each consist of 13 weeks and 39 weeks, respectively. The Car Wash segment is currently consolidated based on a calendar month end.

Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited interim financial data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of operations, balance sheet, cash flows and shareholders’ equity for the interim periods presented. The adjustments include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

These interim consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 25, 2021. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three and nine months ended September 24, 2022 may not be indicative of the results to be expected for any other interim period or the year ending December 31, 2022.

Use of Estimates    
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes to the consolidated financial statements. Estimates are based upon historical factors, current circumstances and the experience and judgment of the Company’s management. Management evaluates its estimates and assumptions on an ongoing basis and may employ outside experts to assist in its evaluations. Changes in such estimates, based on more accurate future information, or different assumptions or conditions, may affect amounts reported in future periods.

Deferred IPO costs
Costs incurred that are directly related to the IPO, such as legal and accounting fees, registration fees, printing expenses, and other similar fees and expenses, totaling $9 million were capitalized and included within prepaid and other assets as of December 26, 2020. Upon completion of the IPO, the Company reclassified these costs, as well as an additional $6 million of IPO costs incurred during the nine months ended September 25, 2021 to Additional paid-in capital within the statement of Shareholders’/members’ equity.

Fair Value of Financial Instruments
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; or
Level 3: Inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
11


Financial assets and liabilities measured at fair value on a recurring basis as of September 24, 2022 and December 25, 2021 are summarized as follows:

Items Measured at Fair Value at September 24, 2022
(in thousands)Level 1Level 2Total
Mutual fund investments held in rabbi trust$711 $ $711 
Interest rate derivative assets designated as hedging instruments$ $11,540 $11,540 
Foreign currency derivative assets designated as hedging instruments$ $2,282 $2,282 
Foreign currency derivative liabilities designated as hedging instruments$ $161 $161 
Foreign currency derivative liabilities not designated as hedging instruments$ $2,622 $2,622 

Items Measured at Fair Value at December 25, 2021
(in thousands)Level 1Level 2Total
Mutual fund investments held in rabbi trust$976 $ $976 
Foreign currency derivative liabilities designated as hedging instruments$ $536 $536 

The fair value of the Company’s foreign currency derivative instruments are derived from valuation models, which use Level 2 observable inputs such as quoted market prices, interest rates and forward yield curves. Derivative assets are included in Prepaid and other assets or Notes receivable, net in the consolidated balance sheet depending on the remaining period to maturity. Derivative liabilities not designated as a hedging instrument are included in Accrued expenses and other liabilities in the consolidated balance Sheet. Derivative liabilities designated as a hedging instrument are included in long-term accrued expenses and other liabilities in the consolidated balance sheet.

The carrying values of cash, restricted cash, and receivables included in the consolidated balance sheet approximate their fair value. The fair value of long-term debt is estimated based on Level 2 inputs using discounted cash flows and market-based expectations for interest rates, credit risk and contractual terms of the debt agreements.

The carrying value and estimated fair value of total long-term debt were as follows: